Research ratings generally moved up in this year’s Brokerage Report Card, and many investment dealers attribute this to brokers feeling better about their businesses.
However, most firms also believe their continuing efforts to enhance the quality and breadth of the research and improve communication with advisors is paying off.

Leading the pack on the Canadian research side is Winnipeg-based Wellington West Capital Inc., surveyed for the first time this year. With a rating of 9.0, it nudges out Toronto-based BMO Nesbitt Burns Inc. in Toronto, which had taken first place the previous three years.

Wellington West, which is also near the top on U.S. research at 8.6, outsources all its research. “It has been one of our advantages out there, [when] research has been questioned so much,” says chairman and CEO Charlie Spiring. “We’re not beholden to some analyst that’s in-house.
This really separates us. If we don’t like something that Merrill [Lynch & Co. Inc.] does, we throw it out.”

Wellington West has been using National Bank Financial Ltd. in Montreal and First Energy Capital Corp. in Calgary for Canadian research and Merrill and Credit Suisse First Boston, both based in New York, for U.S. It has just added Desjardins Securities Ltd. and Orion Securities Inc. to its Canadian research sources.

On U.S. research, Raymond James Ltd. replaces Mississauga, Ont.-based Edward Jones in the top spot, a position it has held by at least a full point since 1998. Unlike most independents, which outsource their U.S. research — in many cases to CSFB — both have research supplied their U.S. parents.

That may explain why neither shone when their brokers rated their Canadian research, although both are addressing the problem.
Raymond James, which looks at everything from a North American perspective, has added a few analysts to its Canadian research team.

Edward Jones has, in addition to hiring new analysts, restructured its research department to put greater emphasis on Canadian research, says Gary Reamey, head of Canadian operations. It provides third-party research from Toronto-based MPL Communications Inc., but all recommendations continue to come from the firm’s own analysts. Edward Jones has also developed research support materials, such as guides for understanding equities, which, Reamey says, “we think our customers will really like.” Reamey adds that the firm has always had a wall between research and investment banking, and that bonuses are tied to the company’s worldwide profitability, not to any single department.

Toronto-based TD Waterhouse Investment Advice, lowest on Canadian research at 6.2 and second-lowest on U.S. research at 5.7, is working on both content and dissemination. It is filling the coverage gaps and continues to upgrade the quality, says Bill Hatanaka, executive vice-president at TD Wealth Management, which oversees the investment advice unit. At the same time, the wealth-management division is building its research marketing capability to roll out the best ideas from its institutional research to its retail investment advisors in different and concise forms.

Stuart Raftus, president and COO of First Associates Investments Inc. in Toronto, is surprised that his firm’s U.S. research rating has come down — to a very low 4.0 — because there has been no change; it still provides CSFB research. On the Canadian side, it has a “top-tier” entirely new in-house research team, which “has substantially improved” the firm’s capabilities.

BMO Nesbitt Burns, Canaccord Capital Corp. of Vancouver, Raymond James, RBC Dominion Securities Inc. in Toronto and ScotiaMcLeod Inc. in Toronto all saw their ratings on both Canadian and U.S. research increase by at least a half-point.

Canaccord has recruited a number of well-ranked analysts, says Mark Maybank, director of research. The firm has expanded tech, biotech and micro-cap, now covers real estate, expects to add pipelines and power and diversified trusts in the near term and will probably look for for a quantitative strategist. It now subscribes to StarMine, which measures the accuracy of analysts’ estimates and recommendations, and now influences Canaccord analysts’ compensation.

Canaccord also has a new publishing platform that allows for the distribution of more timely, more complete and fully compliant daily notes. And unlike previous e-mails, these notes can be distributed to clients. As well, within 10 to 15 minutes of a significant event, updates can be distributed. Along with Canaccord’s “Go Desk,” which answers questions and provides ideas, it has “Go TV,” which provides interviews with analysts and corporate issuers that advisors can watch on their own time.